Compulsory licences may spur more voluntary licensing deals

Compulsory licensing allows a drug to be produced cheaply by a rival, typically a domestic generic manufacturer, because it’s been deemed to be too costly or inaccessible to patients who need it. Photo: Pradeep Gaur/Mint

Mumbai: Foreign drug makers may rush to sign exclusive product licensing deals with local partners in a pre-emptive move after an unexpected decision by the Indian government that may lead to the issuing of several compulsory licences.

Compulsory licensing allows a drug to be produced cheaply by a rival, typically a domestic generic manufacturer, because it’s been deemed to be too costly or inaccessible to patients who need it.

India issued its first compulsory licence in February last year, allowing Hyderabad-based Natco Pharma Ltd to make Bayer AG’s lung and kidney cancer drug Nexavar at one-tenth the price. The drug cost Rs.2.80 lakh for a month’s treatment, although Bayer said it was being made available at a cheaper price to those who couldn’t afford it.

It was reported last week that the department of industrial policy and promotion, which is responsible for policy decisions regarding intellectual property rights, is going ahead with a proposal to issue compulsory licences for three patented cancer drugs—dasatinib, ixabepilone and trastuzumab—sold by foreign pharma companies.

Voluntary licensing to a local partner under mutually agreed terms will not only help drug makers expand the market but also avoid compulsory licensing action. While government intervention will lead to a drastic reduction in price as it’s typically without the consent of the patent owner, voluntary licensing will still ensure the companies make a profit, albeit at a lower price.

“By granting a voluntary licence to local partners in different markets (mostly poor and developing countries), the patent owners make sure that the drugs are sold at a price that is at least one-third of the original price,” said Gopakumar Nair, a drug industry veteran and a patent consultant in Mumbai.

Others are marketing deals that don’t include technology transfer. One such involves US drug maker Merck and Co. Inc.’s Indian unit MSD Pharmaceuticals Pvt Ltd and Sun Pharmaceuticals Industries Ltd for the sale of two patented diabetes drugs—Januvia and Janumet—in the local market under different brand names.

Swiss drug multinational Novartis AG has signed up with Mumbai-based Lupin Ltd to sell the former’s patented chronic obstructive pulmonary disease (COPD) drug Onbrez, while Bayer plans to licence most of its products for India to its local joint venture with Ahmedabad-based Cadila Healthcare Ltd.

“We sell these products in India under a marketing licence agreement with MSD,” a Sun Pharma executive said on condition of anonymity. Other companies declined to comment.

“An exclusive manufacturing and marketing alliance with a local drug maker is a wiser option to avoid a likely invocation of the compulsory licensing Act,” said an executive at a foreign drug maker. Although this means having to split the profit with the local partner, this “will help minimise the loss and also ensure better access of the patented drug to domestic patients”. But more importantly, it helps counter one of the most common reasons for issuing compulsory licences—patient access, said the executive who didn’t want to be identified.

The possibility of three more compulsory licences being granted and several instances of alleged product patent infringements have made the environment uncertain for innovator companies in India, said Tapan Ray, director general of the Organisation of Pharmaceutical Producers of India (OPPI), a lobby group representing foreign drug makers in the domestic market.

Ray said the grant of the compulsory licence for Nexavar to Natco had already raised serious concerns across the world on the how robust the intellectual property rights ecosystem was in India.

“Recent news reports on the government move will vindicate those concerns,” Ray said.